TMI Blog2014 (7) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... 47(6) of the Act can be imposed on the owner of the goods to be realized by the sale of the goods as provided under section 47 of the Act. Undoubtedly, if the seller continues to be the owner of the goods, nothing more remains to be enquired and his guilty mind would clothe the officer with authority to visit him with penalty by sale of the goods. Not only did the seller had the intention to evade the payment of tax, but the consignee was also party to it or was colluding with the seller. - In the circumstances of this case, this court is inclined to find that the consignee is the owner. This court already alluded to the relevant provisions in the Sale of Goods Act. Quantum of penalty - Held that:- relief must be given to the party. Twice the amount of tax (Rs. 5,25,000) is ₹ 10,50,000. There is complaint that the penalty levied exceeds even twice the amount of tax. This is a case where there was a bank transaction. The tax has been paid. - penalty to be imposed equal to ₹ 3.00 lacks. View of other Judge while concurrence with first Judge - Held that:- From the evidences on records, it is clear that buyer has got the ownership of goods - Further, the authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not released. He thereupon filed a writ petition See page [2014] 67 VST 354. for directing release of the excavator. The learned single judge disposed of the said writ petition by directing that if the State did not file revision against the order of the Appellate Tribunal within a period of fifteen days, the excavator must be released to the consignee. It is feeling aggrieved by the same that the consignee has preferred Writ Appeal No. 121 of 2013. It would appear that the consignee had availed of a loan from M/s. Indus Ind Bank Ltd. in connection with the purchase of the excavator. In the light of the detention of the excavator, the bank filed a writ petition See page [2014] 67 VST 353. for a direction that the excavator shall be released to it. The said writ petition being unsuccessful, the bank has preferred Writ Appeal No. 1714 of 2012. Since the State had filed a revision petition within the time granted by the learned single judge and it is found that there was a prima facie case made out, this court had granted stay of the order of the Appellate Tribunal. Thereafter, this court proceeded to hear the matter. Since certain issues arose which this court considered to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transporter is attempting to evade payment of the tax due, it is open to the officer to detain the goods. Thereafter, the officer unless it be that the tax has been paid and he drops the proceedings, must proceed to make an adjudication. The procedure for making the adjudication is as contemplated under section 47(6) of the Act. Section 47(6) of the Act provides that if the officer finds that there has been an attempt to evade the payment of tax that he shall impose penalty, not exceeding twice the rate of tax sought to be evaded on the owner of the goods. The penalty can be realised by sale of the goods. Section 47(15) of the Act contemplates refund of the excess amount realized on the sale of the goods to the owner of the goods. Now let me turn to the facts: The consignee claims to be a works contractor. According to him, a quotation was given in December, 2011. Under receipt, a sum of ₹ 17,60,000 was given by him to the consignor. The consignee availed of a loan from the Indus Ind Bank. The first instalment towards the loan was paid to the bank on January 25, 2012. The invoice is dated January 20, 2012 and the transport of the excavator was made on February 8, 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excavator to the tune of ₹ 47,30,250 in question. It is further found that the details of the closing stock value as on March 31, 2011 and stock inventory e-filed by the consignor for 2010-11 are as follows: Closing stock as on 31-03-2011 : (a) Rock drill and its parts : ₹ 43,012.07 (b) Tractor parts : ₹ 7,70,109.14 -------------------- Total : ₹ 8,13,121.21 -------------------- The aforesaid is the closing stock as on March 31, 2011. Without any accounted purchase of the excavator or availability in opening stock, it is found that it is sure that the seller is disabled in accounting properly its sale. Hence he can only suppress the sales even though the transport is supported by 8B bill. It is stated that there is no doubt about the transportation and transactions would have been unnoticed, but for the detention. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsignor and the sale is reflected in the return filed by the consignor and, therefore, there is no justification for finding that there is attempt to evade payment of tax, it is found. Apparently, the Tribunal found merit in the contention of the consignee that the excavator was being taken to the Santhigiri Ashramam in Thiruvananthapuram, as the consignee was a devotee who wanted the vehicle to be presented there before putting it to use. The materials do not indicate that there was an attempt on the part of the consignee to evade payment of tax, it is found. The Tribunal set aside the order of penalty. The Intelligence Officer was given liberty to make further investigation with regard to the transactions of the consignor and the consignee's revision was allowed. The learned Government Pleader would submit that the finding of the Tribunal cannot be justified. As found by the adjudicating authority and the appellate authority, there was clear attempt to evade payment of tax. According to him, under section 47(6), once it is found that there is attempt to evade payment of tax, penalty can be imposed. He would submit that what is relevant is only that there must be an attempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tually section 47(6) of the Act is a re-production of section 29A of the KGST Act. He would submit that there is clear defect in the drafting of the section under the VAT regime. He would submit that under the KGST Act, it was mostly single point taxation whereas under the VAT regime, it is a multi-point tax regime. No doubt, there is multi-point tax also under the KGST Act. He would submit that there may be attempt to evade tax by a person after the sale and during the transport. He may attempt to sell a part of the goods. He may attempt to sell the goods by attempting to evade tax which he would have to pay on a subsequent transaction by him. It may not be just to impose penalty on the buyer of the goods to whom the property has passed under the concluded sale when he is completely innocent and what is more, he had paid the entire tax to the seller who collects as the agent of the Government. The learned counsel for the consignee would contend that there is no merit at all in the Government's revision. He would submit that the consignee was a works contractor who is having registration at Kollam. He has been allowed to pay tax on the compounded basis. He would submit that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsignor to the Department. Learned Government Pleader on instructions submitted that there are no materials to find that the consignor had made available documents to account purchase of an excavator. This is for the reason that in the return filed by the consignor on which Shri G. Bhagavat Singh relied on, the column against which the purchase is shown takes in other items apart from excavator. Probably, there were some other items other than excavator which had been purchased. In this context, it is relevant to note that going by the finding, the consignor was not having registration to deal in excavators. This also disabled this court from finding as to whether the so-called excavator shown as purchased, is the same excavator which is the subject-matter of the present controversy, a finding on which lines, was sought by the consignor. But, no details are forthcoming. Shri G. Bhagavat Singh would also contend that the writ appeal filed by him must be allowed and the writ petition filed by him for release of the excavator should have been allowed, he contends. Once the Tribunal set aside the order of penalty, there is no basis at all for the Department to not release the vehicle, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... STC 337 (Ker) is applicable though the phrase used in section 29A(4) is slightly different from the phraseology in section 45A of the KGST Act. Levy of maximum penalty was found to be unreasonable and irrational. The court found that the reason given by the Tribunal that penalty under section 29A(4) of the KGST Act is different from the penalty to be imposed under the other penal provisions is unsustainable and the order of penalty was set aside. (v) In V. Ramachandran v. State of Kerala [1994] 92 STC 221 (Ker), a Bench of this court was dealing with a case where the petitioner therein sold milk powder manufactured by two manufacturers. The manufacturers collected tax on their sales to the petitioner being first sales. The petitioner employed a travelling sales man who effected the sales of the milk powder. The vehicle was intercepted having no records to accompany the transport. The petitioner's claim that the sales were second sales was rejected and it was held that there was attempt at evasion. The court took the view that admittedly the petitioner was second seller of milk powder and that when there were no proper and valid documents, it may be possible to presume that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credit on the ground that the dealers from whom the petitioners had purchased the goods had not deposited the full tax. A writ petition was filed for declaring section 8(3) of the Act in question as ultra vires. The court, inter alia, held as follows: In legal jurisprudence, the liability can be fastened on a person who either acts fraudulently or had been a party to the collusion or connivance with the offender. However law nowhere envisages to impose any penalty either directly or vicariously where a person is not connected with any such event or an act. Law cannot envisage an almost impossible eventuality. The onus upon the purchasing dealer gets discharged on production of form VAT C4, prescribed under rule 20(1) of the Haryana Value Added Tax Rules, 2003, which is required to be genuine and not thereafter to substantiate its truthfulness by running from pillar to post to collect the material for its authenticity. In the absence of any mala fide intention, connivance or wrongful association of the purchasing dealer with the selling dealer or any dealer earlier thereto, no liability can be imposed on the principle of vicarious liability. Law cannot put such onerous responsib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they were being carried on behalf of the owner of the goods who was said to be the consignor. In short, his contention is that it could not be said that the consignee was the owner and it is his further contention that there was collusion between the consignor and the consignee. (ii) In Ibrahim Isaphai v. Union of India AIR 1966 Guj 6, a Bench of the said court took the view that mere endorsement on the railway receipt does not transfer the property in the goods covered by a railway receipt and what is relevant was the intention of the parties which had to be decided with reference to the terms of the contract, the conduct of the parties and the circumstances of the case. (iii) In Leigh Sillavan Ltd. v. Aliakmon Shipping Co. Ltd. [1985] 2 All ER 44, the Court of Appeals took the following view: The shipowners' appeal would be allowed for the following reasons- (1) Under the original contract of July 1976 the property in the goods was not to pass to the buyers until the sellers received a bill of exchange endorsed by the buyers' bank and therefore under section 19(1) of the 1979 Act the property in the steel remained with the sellers until that condition was m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull load of diesel outside Mahe, was that it had developed a valve problem. The court found the explanation unacceptable and the attempt of the respondent was found to be to sell the goods in Kerala. It was found to be a case of a clear attempt to evade tax and the respondent could not claim exemption from penalty by accounting the goods after the fraud was detected. The learned Government Pleader contended that the subsequent payment of tax after the detection in the facts of this case, when he had not accounted, the purchase was a clear attempt to evade payment of tax. (vii) In Abdul Aziz Bepari v. Jogendra Krishna Ray [1916] ILR Calcutta 98, the court, inter alia, held as follows: The Indian law is the same and the provisions of section 81 of the Contract Act do not exclude the question of intention which is laid down in the English cases as the determining factor. Where according to the usage of trade at Chandpur the sale of jute by fariahs is not complete until the goods are examined, selected and weighed by the company (purchaser) although stored in the godowns of the company by whom advances have been made to the fariahs against these goods. (viii) In Arcot Mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and conditions set out in the agreement, and the option to purchase exercisable by the customer on payment of all the instalments of hire arises when the instalments are paid and not before. In such a hire-purchase agreement, there is no agreement to buy goods ; the hirer being under no legal obligation to buy, has an option either to return the goods or to become its owner by payment in full of the stipulated hire and the price for exercising the option. This class of hire purchase agreement must be distinguished from transactions in which the customer is the owner of the goods and with a view to finance his purchase he enters into an arrangement which is in the form of a hire purchase agreement with the financier, but in substance evidences a loan transaction, subject to a hiring agreement under which the lender is given the licence to seize the goods. (iii) In Executive Engineer v. Sri Seetaram Rice Mill [2012] 2 SCC 108, the apex court was considering the provisions of the Electricity Act, 2003. Therein, inter alia, the court held as follows: 35. All these explanations clearly show that dishonesty is a state of mind where a person does an act with an intent to deceive t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same. But, it is indisputable that the detention of the vehicle took place on February 8, 2012. I am in agreement with the learned Government Pleader, in the circumstances established by materials available in this case, that it is a clear case of subsequent accounting and payment of tax by the consignor after the factum of detention. I am of the aforesaid view, despite the fact that the consignor had time till February 20, 2012. It is undoubtedly true that before penalty is imposed on the finding that there was attempt to evade the tax, there must be materials warranting such a finding. The intention of a party to evade payment of tax is to be considered based on the facts of each case and on the strength of the materials which point to circumstances which warrant the requisite finding under section 47(6) of the Act. The consignor has not contested the imposition of penalty which the adjudicating officer has imposed on him also. He has not carried the matter in appeal. He must be treated as having accepted the findings. Even then, this court notice, as pointed out by the learned Government Pleader, that the Appellate Tribunal has set aside the order of penalty. Thus, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be given back to the owner of the goods. The question as to who is the owner of the goods has really not been found by the authorities, as pointed out by the learned Amicus Curiae and admitted by the learned Government Pleader. The final fact-finding body is the Appellate Tribunal. In fact, the learned Government Pleader would point out that the adjudicating officer has proceeded against both the consignor and the consignee as according to him, at that stage it was not clear to the adjudicating officer as to who was the owner of the goods. As already noticed, penalty has been imposed both on the consignor and the consignee. This, this court find is impermissible and unacceptable. Section 47(6) of the Act permits imposition of penalty only on the owner of the goods. In this case, either the consignor or the consignee is the owner of the goods. Both of them could not possibly be treated as owner of the goods at the same point of time. Property in the goods is with either of them. Property passes on a sale of goods as contemplated under the Sale of Goods Act, 1930. Section 19 of the said Act reads as follows: 19. Property passes when intended to pass.-(1) Where there is a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no intention on his part to sell the excavator to another and evade the payment of tax by him, no penalty on the consignee is possible, it is submitted. On the other hand, according to the learned Government Pleader, irrespective of whether the consignee has colluded with the consignor as was the case of the authority, on there being intention to evade the payment of tax established, that suffices, he submits. Blocking the loopholes in tax evasion, even when an attempt is made by imposing penalty, is well within the authority of the Legislature, he points out. Under section 47 of the Act, the imposition of the penalty is brought to its logical conclusion by the realization of the amount of penalty by the sale of the goods which are detained and seized and later sold, he submits. Unlike under section 67 of the Act, when an order of penalty may be passed which may turn out to be incapable of being realized, in the case of the penalty order which is passed under section 47(6) of the Act, the Legislature intends the effective realization of the penalty also by the sale of the goods which are detained. No doubt, I must deal with the further question as to whether the buyer being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty may pass even though the entire price is not paid. In a case where there was a completed sale though the price is not fully paid, undoubtedly, when the goods are sold, a question may arise whether the consignee can set up the penalty and the compulsory sale in defence to a suit for payment of the price or the balance amount. The statutory compulsory sale would no doubt in such a case put an end to the lien which the seller may have. The court has to primarily gather the intention embedded in a provision with reference to the words used in the provisions. Section 47(2) of the Act provides for detention of goods, that if the officer has reason to suspect,inter alia, that any person transporting the goods, is attempting to evade the payment of tax due under the Act. In this case, the goods were being carried by a carrier. There is not much dispute that the carrier was engaged by the consignor. No doubt, the consignee has a case that it was being dispatched by the consignor at his instance. As far as the carrier is concerned, this court would proceed on the basis that he was an agent of the consignor. The driver has given a statement wherein he has, inter alia, stated that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that in the case of a contract for the sale of unascertained goods, unless the goods are ascertained, there is no transfer of property in the goods. Section 19 being relevant, is extracted below: 19. Property passes when intended to pass.-(1) Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. (2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. (3) Unless a different intention appears, the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. At this juncture, it is necessary to consider what is meant by specific goods . Specific goods is defined in section 2(xiv) as goods identified and agreed upon at the time a contract of sale is made. As far as the words ascertained goods is concerned, this court may notice the following commentary in Pollock Mulla in the Sale of Goods Act (Sixth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made. (2) Delivery to carrier.-Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer, and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract. As far as delivery to a carrier or other bailee resulting in deemed unconditional appropriation of the goods to the contract is concerned, it is subject to the condition that the seller has not reserved the right of disposal. Section 24 of the Sale of Goods Act deals with consent on approval or sale or return. In this case, there is no finding as to whether the consignor or the consignee is the owner. In fact, the officer has imposed penalty on both which is plainly impermissible. This question has not also engaged the attention of the fact finding authorities. I have already found that the consignor did have the intention to evade payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with, the stipulation that TIN/PIN along with complete address should be compulsorily given in bills/invoices will apply only to dealer-to-dealer transactions. ... 11. Complete address of the buyer will be required to be given in case of dealer-to retail consumer sales only if the sale value is ₹ 5,000 or more. Circular No. 46/07 reads as follows: Sub: The KVAT Act, 2003-section 40A-Insistence on TIN/PIN/Details of purchasing dealers and declaration in lieu thereof-Reg. Read: Circular No. 39/2007 dated August 24, 2007 of Commissioner of Commercial Taxes. The circular read above has brought out the difference in billing requirements between business to business (B2B) and business to consumer (B2C) transactions. It was also made obligatory in B2B transactions to disclose the identity of the purchaser. In case the purchaser was below the registerable limit, he was given the option of filing a declaration as in the case of individuals wanting to get exemption from tax deduction at source under the Income-tax Act, 1961, who have to give a declaration in form 15G. However, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to evade the payment of tax. Section 47(6) of the Act does not specifically and expressly say that the attempt to evade tax due under the Act must be by the owner. In this context, this court must consider firstly whether the interpretation sought to be placed by the consignee, namely, that unless there is an attempt to evade tax by the consignee on the supposition that the consignee is the owner of the goods, there can be no penalty, will render the provision a dead letter. Under the Act, what is contemplated is multi-point taxation. Taxes are contemplated on value addition. Even after a sale takes place and ownership has passed and the goods are being transported, there could be cases where the consignee/ owners could indulge in attempts to evade the tax. Take for example, in this case itself, if the goods were after being purchased, purportedly for the own use of the consignee, he had actually intended a resale and the goods were detained at or near the place of the proposed second buyer of goods or the proposed buyer of the goods from the consignee, clearly there will be an attempt on the part of the consignee/owner to defeat the due payment of tax. In a case where large numb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id. The substantial amount which would include the amount of tax was paid only on February 13, 2012, that is, after the detention. No doubt, the consignee would point out that there was an assurance of the finance being provided by the bank as far as the consignor was concerned, and it is not unlike a situation where a payment is made by cheque. I am not inclined to agree. As on the date of the invoice and the proposed delivery, it is clear that the seller has not received the entire amount. This court is also not impressed by the argument of the consignee that since ₹ 17,60,000 was paid and tax amount is less than 1/3rd of the same and the State has first charge over the tax, it must be treated that the tax amount was paid. In other words, this court would only say that it is not as if the payment was made as contended of the entire amount inclusive of the tax. Still further, this court must also notice that the question as to ownership of the goods, must be decided with reference to a point of time not later than the date of detention. That is a point of time when the officer entertains suspicion that there is intention to evade the tax under section 47(2) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the consignee is the owner. This court already alluded to the relevant provisions in the Sale of Goods Act. This court may also advert to the definition of sale in section 2(xliii) of the Kerala Value Added Tax Act as follows: 2. Definitions.-In this Act, unless the context otherwise requires,(xliii). 'Sale' with all its grammatical variations and cognate expressions means any transfer whether in pursuance of a contract or not of the property in goods by one person to another in the course of trade or business for cash or for deferred payment or for other valuable consideration, but does not include a mortgage, hypothecation, charge or pledge. Even under section 5 of the Sale of Goods Act, neither the delivery of goods, nor the full payment of the price is a criterion for the passing of property. In this case, there is a third party, namely, the bank. Quite clearly, the consignor stood assured of payment of the full price through the medium of the arrangement made with the bank. There is delivery effected to the carrier. In this case, there is delivery of the goods effected through the goods being delivered to the carrier for being sent to the buyer. The st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand dismissed. This court records its appreciation for the efforts put in by Shri Muhammed Rafique who assisted us as Amicus Curiae in arriving at the conclusions which we have arrived at. K. RAMAKRISHNAN J.-I have gone through the judgment of my learned brother and I am fully agreeing with his findings, conclusions and the reliefs granted, but I wish to touch upon some more aspects, which I am adding in this judgment. As regards the appeal filed by the bank, namely W.A. No. 1714 of 2012 is concerned, they cannot be deemed to be the owner of the goods as there is only a debtor-creditor relationship between the appellant and the second respondent, in view of the dictum laid down in the decision in Sundaram Finance Ltd. [1966] 17 STC 489 (SC). At the most, they may have a lien over the goods, namely, the excavator, detained in this case and they may be entitled to get the balance amount if any available after the sale of the vehicle by the Department and adjustment of the penalty amount imposed, if the owner of the goods did not pay the penalty imposed in this case. Except that right, they have no right to get delivery of the vehicle as they are not owner of the goods. So, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments (in cases where such documents are necessary) or that any person transporting the goods is attempting to evade payment of the tax due under this Act, he may, for reasons to be recorded in writing, detain the goods and shall allow the same to be transported only on, the owner of the goods or his representative or the driver or other person in charge of the vehicle or vessel on behalf of the owner of the goods, furnishing security for double the amount of tax likely to be evaded, as may be estimated by such officer: Provided that such officer may, if he deems fit, having regard to the nature of the carrier or the goods and other relevant matters, allow such goods to be transported on the owner of the goods or his representative or the driver or other person in charge of the vehicle or vessel executing a bond with or without sureties for securing the amount due as security: Provided further that where the documents produced in support of the transport of goods evidence defects of a minor or technical nature only and the goods are owned by a dealer registered under this Act, such officer may allow the goods to be transported after realizing the tax on the turnover of the goods un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another officer of higher rank. Culmination of such enquiry should result in an adjudication as to whether there was an actual attempt to evade payment of tax due under the Act. Hence it is evident that even if there exists a reasonable suspicion regarding attempt of evasion of payment of tax, penalty can be imposed after completing an enquiry only if the officer arrives at a conclusive finding that such an attempt was there in existence. Conclusive finding contemplated under section 47(6) of the Act, regarding the attempt to evade tax could not be on mere presumption. There should not be any missing link between the suspicion of attempt of evasion of tax and the existence of an intention of attempting to evade tax by the owner of the goods. Further, in the decision reported in Gheru Lal Bal Chand v. State of Haryana [2011] 45 VST 195 (P H), the Punjab and Haryana High Court, while considering the penalty provisions under the Haryana Value Added Tax Act and Rules, 2003, observed that no liability under the Haryana Value Added Tax Act, 2003 could be fastened on the purchasing registered dealer on account of non-payment of tax by the selling registered dealer in the treasury, unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the description of goods is the basis of the contract, the falsity of the description would make the goods substantially different from those that were described so as to constitute a failure of consideration. Where the goods are bought by description, there is an implied condition that the goods shall be of merchantable quality. The Sale of Goods Act does not give any definition of the word 'merchantable', yet the word has by long use, become a term of art in commercial law. Merchantable quality means that the goods comply with the description in the contract so that to a purchaser buying goods of that description, the goods would be good tender. Goods are of merchantable quality, if they are of such a quality and in such condition that a reasonable man, acting reasonably, would, after a full examination, accept them under the circumstances of the case in performance of the offer to buy them, whether he buys for his own use or to sell it again. In the same decision, it has been observed that the mere receipt of goods does not amount to acceptance and before the buyer can be called upon to accept the goods, he can claim a reasonable opportunity to examine the goods. Tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings. So, the observation made by the Tribunal in the order that since the buyer has paid tax and subsequently, the seller also accounted the same by filing a return and thereby, there is no offence of evasion of tax and exonerating the appellant from the liability, appears to be not correct in view of the legal position discussed above. Neither the Tribunal nor the adjudicating officer nor the first appellate authority has considered the fact as to who is the owner of the goods at the relevant time and even if the purchaser has become the owner of the goods, whether there was any connivance or fraudulent act on his part with the seller in evading payment of tax, etc. The adjudicating officer found both the seller and the buyer responsible for the payment of penalty which was confirmed by the first appellate authority which appears to be not correct. Further, the Tribunal had, without the order being questioned by the seller, set aside the finding of the authority below that there was an attempt on the part of the seller for evasion of the tax, but for the detection, he would not have paid the tax and making him liable for the penalty was also set aside by the Tribunal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been made, if the goods are within the State,-(i) in the case of specific or ascertained goods at the time the contract of sale or purchase is made; and (ii) in the case of unascertained goods or future goods, at the time of their appropriation to the contract of sale or purchase by the seller or by the purchaser, whether the assent of the other party is prior or subsequent to such appropriation. So, in order to become a completed sale of ascertained goods, it must be available at the deliverable state at the time of sale and in such cases, sale will be complete on the date on which the sale has taken place. Section 19 of the Sale of Goods Act says as to when the property intends to pass in the case of sale of goods. Section 19(1) says that where there is a contract for sale of specific or ascertained goods, the property in them is transferred to the buyer, at such time as the parties to the contract intend it to be transferred. Sub-section (2) of that section says, for the purpose of ascertaining the intention of the parties regards shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. Sub-section (3) says that unless a dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract. So, it is clear from the above that the question as to when the property passes will depend upon the facts of the case, intention of the parties, conduct of the parties and terms of the contract. When there is no written terms of the contract, then it has to be ascertained from the conduct of the parties and circumstances of the case and with the help of the provisions of the Sale of Goods Act. In the decision reported in Contship Container Lines Ltd. v. D.K. Lall AIR 2010 SC 1704, it has been held that in the case of f.o.b. contract, the goods are delivered free on board the ship. Once the seller has placed the goods safely on board at his cost and thereby handed over possession of the goods to the ship in terms of the bill of lading or other documents, the responsibility of the seller ceases and the delivery of the goods to the buyer is complete. The goods are from that stage onwards at the risk of the buyer. In the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had sent notice to the buyer and an opportunity was given to him before ordering penalty as well. So, under such circumstances, it can be safely concluded that the title in the goods passed to the buyer in this case and he has become the owner of the goods for the purpose of this section. Since it is found that the buyer has become the owner of the goods, penalty can be imposed on him only if it is proved that he had colluded with the seller in his attempt to evade payment of tax. It is seen from the documents and the enquiry report of the Intelligence Officer, that the seller was not authorized to deal in excavator. Further, no purchase of excavator was shown in the stock of the seller in his return filed by him in the month of December 2011. Further, his stock statement also does not show that there was any excavator available with him as on the date when the quotation was drawn in favour of the buyer, i.e., on December 16, 2011. The invoice that accompanied the goods was dated January 20, 2012. There is nothing on record to show that the excavator was available with the seller even at that time as his stock statement does not reveal the existence of such excavator with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank either by the seller or by the buyer. If really interception of the article was made known to the bank, they would not have effected payment of the amount till the excavator was released either by the seller or by the buyer from the authorities. This gives an indication that the buyer was also interested in making payment to the seller even before the article was released by the authorities and this gives an indication that he had colluded with the seller. The fact that the purchase of excavator was not accounted by the seller in his return will go to show that but for the interception, he would not have paid the tax and he would have avoided payment of tax payable to the Government and appropriated the same for his purpose. Further, the fact that he is not an authorised dealer for dealing with such article also gives an indication that he would not have paid the amount collected towards tax from the bank, but for the intervention by the authorities. The fact that the original invoice alone accompanied the goods along with the transport of goods is also an indication that if the article was not intercepted by the authorities, he would not have paid the tax. Further rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, the fact that the seller had not co-operated in the proceedings also will go to show that his intention is very clear that he had intended to evade tax, and there was existence of attempt on the part of the seller to evade payment of tax due to the Government. So, it is clear from the above circumstances, that the finding arrived at by the authorities that there was an attempt on the part of the seller to evade payment of tax and subsequent filing of return on February 17, 2012 and payment of tax by the seller is an afterthought and in connivance with the buyer after getting the amount from the bank, but for the intervention of the authorities, and detention of the article by the authorities, he would not have paid the tax is perfectly justifiable and they were justified in coming to the conclusion that there was attempt on the part of the seller in evasion of payment of tax and as such the goods are liable to be proceeded against, and penalty has to be imposed. It is clear from the circumstances that the buyer is also colluding with the seller in the attempt of evasion of tax. It may be mentioned here that he was alleged to have paid ₹ 17,60,000 as advance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and there was an underdealing between the buyer and the seller regarding the excess amount obtained through bank. So, all these things will go to show that there was a collusion and fraudulent intention on the part of the buyer as well, in helping the seller in avoiding payment of tax, and as such it cannot be said that he is a bona fide purchaser, without any intention to collude with the seller in avoiding payment of tax and the finding to that effect by the Tribunal appears to be unsustainable in law. So, even assuming that he becomes the owner of the goods, as proceeded by the authorities in this case and as found by this court as well, he is also liable to be proceeded against for the act of the seller as he had colluded with him for this purpose, and as such he will be liable to pay the penalty and the exoneration made by the Tribunal of the buyer is also unsustainable in law and hence the same is also liable to be set aside on this ground. The question as to whether even if the buyer is a bona fide purchaser and he had not colluded with the seller in his attempt to evade payment of tax, whether the goods can be proceeded with for the attempt to evade payment of tax by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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